While many people don’t realize this, there is a big difference between being wealthy and being rich. Having wealth means stability and sustainability. Money is tricky to manage and poor spending can get you into serious financial problems. Here are tips on how to manage money effectively.
Record all your expenses
Make a list of your expenses and divide them into categories such as entertainment, insurance, transportation, food and medical expenses. You can then keep track of how much you’re spending in each of your categories and come up with an effective budget.
Review the expenses incurred each month
Take a look at your expenses and remove those items that you can do without. Eliminate costly habits such as eating out and taking your children to expensive places.
Record the smallest purchases
The small dollars you pay for some purchases will finally add up to a significant amount of money. The next time you go shopping, be sure to avoid impulse purchases because these can eventually lead to debt problems.
Save some money each month. Most financial experts advise you to save at least 10% of your monthly income. If you cannot save that much, at least save a little as it will eventually add up.
If you cannot afford it, then do not buy it. Most people accumulate debt because they use their credit cards to pay for items they could not afford if they paid cash. Buy what you need not what you want.
Review your bank statements
Review the statements from your bank and your bills to make sure that they are accurate. List the bills along with their due dates. This can help keep you from missing a payment.
Estimate your weekly expenses
Make an estimate of how much you spend on food, toiletries, clothing, etc. Add up your income at the end of each week and subtract your expenses. You should have more income than expenses. If the amount is less, look for ways to increase your income.
Before you invest any money, review the various options and make sure the investment is viable. An investment can act as an extra source of income when you start earning from it.
Beware of credit card debt
Pay off the balance on your credit card each month to prevent it from increasing. Use your credit card sparingly to prevent it from accumulating debt. That way you will have a small balance on the card that you can clear. Make sure you have the money to pay for anything you charge.
Set financial goals
Goals enable you to stick to your budget so you will not overspend. If you have a goal that you want to achieve, you will set aside money to realize it. Determine the total amount of money you will need to achieve that goal and then divide that amount by 12 months to see how much you will need to save each month to achieve it. Short-term goals can be those you could achieve in a year, midterm goals could be those you could achieve in two to five years and long-term goals could be those that would be attainable after a period of five years.
Check your bank account
Watch your bank account to make sure that you are on track with your spending. If you find any incorrect charges, make sure you get them removed.